When news first rolled in, back in December, that SAP was going to acquire SuccessFactors my first reaction was – makes sense, that brings them some much-needed scale, with 15k customers and the potential for volume economics. And of course an aggressive sales force that lives and breathes cloud deals.

But then a week or so later at SAP’s annual Influencer event something began to nag at me. You see- the SAP cloud story was finally beginning to look pretty solid. The company has adopted agile development, and even some user centric design, to make its products more appealing to the end user, rather than the IT department or Big LOB. SAP’s cloud products actually seem to make a virtue of usability.

LOB Sales On Demand
Sourcing On Demand
Career On Demand
Travel On Demand
Carbon Impact On Demand
Environmental Health and Safety on demand

Given the subject in hand, lets look at Career On Demand, which is a lightweight, social-oriented human resources app. The demos I have seen so far indicate software that SAP should be able to sell pretty easily into the “Talent Management” software market. But – and this is the kicker – it would take a long time to get critical mass by building tons of tiny deals.

Just after the SuccessFactors acquisition was announced some developers I know popped up and said how much they hate SuccessFactors. It gets in their way, its an end of the quarter or year budgeting app that they don’t like to use. This isn’t end users choosing platforms, this is top down stuff. It was just like hearing complaints about Oracle Expenses from the business people I spend time with.

The final question in my mind after two days at the Influencer summit, was – would SuccessFactors get the nod from the new cloud savvy SAP if it was an internal product? I suspect not.

“We are starting to witness separation in the [$4.5bn Talent Management] market where size, scale and financial viability is essential for long-term survival. Market share will ultimately be determined by three factors: 1) strong ORGANIC growth, 2) continued innovation in existing and new products, and most important, 3) happy customers.”

So far so good. But then using Oracle’s Siebel acquisition as an argument from history, Jason says:

“As ERP vendors begin to “bolt on” talent management, in a mix of cloud and on-premise models, IT is likely to return as the primary decision-maker. I have yet to run into any HR professional that wants to hand the keys of the car back to IT.”

Jason argues the market will bifurcate into large ERP vendors selling their stuff through IT, and cloud talent management vendors selling directly to this business. My question then is – which one is SuccessFactors? The acquisition’s tagline is Business Execution Software. rather than Helping Employees Flow or something more human and maybe fluffy, but its precisely the fluffy stuff, the consumerisation of IT, the copying of Expensify features for the SAP’s new Expenses On Demand that marks out where the ball is going to land. The future designs for the human, rather than just the organisation. So is SuccessFactors the new Siebel, in Jason’s terms, or something else?

Salesforce.com just a couple of weeks later jumped into the market and acquired Rypple (tagline Work better, together), which talks to Social goals, and has a customer base of next generation web companies.

Once again I should stress I don’t know SuccessFactors that well (I am generally an infrastructure guy, though web app curious), and it could be that most people feel that using SuccessFactors is like breathing fresh air.

But I am left wondering whether the deal is really just about cloud scale, rather than humanisation of IT, which is where the real value is beginning to be felt. I will know more once the deal closes, and or I take a deeper look at SuccessFactors.

I am listening to developers, and we all know they can be squeaky wheels – but they also understand the value of flow better than anyone.

disclosure: SAP is a client and paid T&E to Boston for the Influencer Summit. Salesforce is also a client. Siebel is not.

5 Responses

James, largely agree with your post. When you say:

“But I am left wondering whether the deal is really just about cloud scale, rather than humanisation of IT”

My view is that yes, this deal is primarily about cloud scale. Some folks who don’t follow SAP closely think SAP has no idea how to build useable cloud products, whereas I think their biggest problem has been how to scale the products they have built.

I don’t think SAP has made much of a secret of pointing out on the initial SuccessFactors calls that a big part of this acquisitionis learning how to do cloud business at volume – because without volume, cloud has no impact on SAP’s financial statements and is not profitable either.

My view is that both aspects are important – cloud scale and humanizing IT by using cloud as a platform for rethinking user experience and process design. It may be that while SF has a lot to teach SAP about the former (volume) they will both have work to do on the latter – if the new SAP cloud operation is willing to invest heavily to build on the smart design thinking approaches that shaped their other LOB cloud apps (Career, Travel, and Sales in particular). Time will tell…

Continuing the Discussion

[…] the changes to the structure and increased sales pressure could create challenges. Others have questioned whether SAP should be concentrating on cloud scale or on humanising IT. Ultimately, it may be too […]